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As Inflation Rises, 37% of Households Use a Credit Card or Loan to Meet Spending Needs — Up 19% From 2021

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As inflation continues to stick around — with a year-over-year increase of 7.7% as of October, according to the latest consumer price index — Americans’ budgets are being stretched thin.

“Persistently high inflation has caused necessary goods that people depend on, like food and shelter, to become more expensive,” says Jacob Channel, LendingTree senior economist.

And despite another Federal Reserve rate hike in November, Channel predicts inflation may remain high over the next few months. “With any luck, as global supply chains continue to mend and the Fed continues to put upward pressure on interest rates, inflation should become much more manageable in 2023,” he says.

In the meantime, many American households need to supplement their cash flow by borrowing to meet their spending needs, according to the latest LendingTree study. We examined U.S. Census Bureau Household Pulse Survey data to find the rate of households using credit cards, loans or another method of borrowing to cover higher spending needs.

Among the key findings: Nearly 3 in 4 American households say recent price increases are causing them at least moderate stress. Find out which demographics and states are leaning most on credit cards, loans and borrowing from friends or family.

Key findings

  • A higher rate of households relies on credit cards or loans to meet spending needs. More than a third (36.5%) of households used credit cards or loans to cover their spending in September 2022, a 19.3% increase from 30.6% last September. The rate of households borrowing from friends or family to cover spending is up 16.7% over the same period.
  • Americans ages 25 to 39 are most reliant on credit cards or loans to cover their spending. Nearly half (47.3%) in this age group used credit cards or loans to meet their spending needs in September 2022, compared with 24.7% of Americans ages 65 and older. The 25-to-39 group also has the highest rate of Americans borrowing from friends or family to cover these expenses.
  • New Jersey has the highest rate of households that rely on credit cards or loans for spending. More than 4 in 10 (43.9%) households in the Garden State use credit cards or loans to meet their spending needs, followed by Florida (41.4%) and Pennsylvania (39.5%). It’s least common in the District of Columbia (26.0%), Arkansas (28.3%) and New Mexico (28.5%).
  • Borrowing from friends or family to cover spending is most common in the South. Households in six Southern states top this list, led by Louisiana (19.6%), Alabama (19.5%) and Mississippi (18.5%). Meanwhile, the states where it’s least common are in three regions: Maine in the Northeast (7.5%), the District of Columbia in the South (7.9%) and Hawaii in the West (8.9%)
  • As inflation continues to rise, nearly 3 in 4 households say price increases in the past two months have caused at least moderate stress. Only 19.2% of households cite a little stress, and just 5.9% say the recent price increases have caused no stress. At least moderate stress is highest in Mississippi (83.9%), Wyoming (82.3%) and Arkansas (81.8%) and lowest in the District of Columbia (50.0%), Minnesota (63.5%) and Massachusetts (65.9%).

More than 1 in 3 U.S. households rely on credit cards or loans to meet spending needs

As inflation makes everyday goods more expensive, more than a third (36.5%) of households used credit cards or loans to cover their spending in September 2022. That represents a 19.3% increase from the 30.6% who said the same in September 2021.

“The sad reality of the present inflation situation is that households need to increasingly rely on things like credit card debt or dipping into their savings — not so they can afford extravagant vacations and luxury goods, but so they can afford basic necessities,” Channel says.

So much has changed in the past year for many households across the country, agrees Matt Schulz, LendingTree chief credit analyst. “That’s what happens when the cost of seemingly everything keeps rising with no end in sight,” he says. “It shrinks Americans’ financial margin for error down to basically nothing.”

What’s more, interest rates are increasing at the same time. The average APR for new credit card offers is 22.40%, which is expected to inch up each time the Fed raises its target rate.

That could be why 16.7% more American households are turning to friends or family — instead of relying on plastic or bank borrowing — than last year.

Percentage of U.S. households using these methods to meet recent spending needs

20212022% change
Credit cards or loans30.6%36.5%19.3%
Borrowing from friends or family11.4%13.3%16.7%

Source: LendingTree analysis of U.S. Census Bureau Household Pulse Survey data from Sept. 15 to 27, 2021, and Sept. 14 to 26, 2022.

“That’s a sure sign of struggle, but it’s completely understandable given how interest rates have skyrocketed,” Schulz says. “Some people would rather risk damaging their relationship with their friend or relative than have to pay 25% to 30% interest to a bank.”

For those in that situation, Schulz recommends establishing clear expectations regarding how long it’ll take to repay and what happens if the loan isn’t repaid. “It may be a really awkward, difficult conversation, but it’s far better to have it in advance rather than when things have gone south and tempers are flaring,” he says.

If you’re the one lending money to a relative or friend, only offer an amount of money you can afford to lose, Schulz says. Considering that 31% of Americans reported to LendingTree in October 2021 that a friend or relative owed them money, it’s something to think about.

American ages 25 to 39 are most reliant on credit cards or loans to cover spending — here’s a deeper demographic look

While the percentage of those using credit cards and personal loans to meet spending is up overall, there’s a significant difference between younger and older demographics. Those in the 25-to-39 age group are much more likely to turn to plastic than the overall average — 47.3% versus 36.5%. The least likely to use credit or loans are people 65 and older, at 24.7%.

The same trend holds for borrowing from friends or family. Nearly 1 in 5 (19.7%) of those in the 25-to-39 age group asked a loved one for a loan, compared with 13.3% overall.

Percentage of U.S. households (by age) using these methods to meet recent spending needs

AgeCredit cards or loansBorrowing from friends or family
18 to 2435.9%17.9%
25 to 3947.3%19.7%
40 to 5440.9%15.1%
55 to 6429.7%10.1%
65 and above24.7%4.6%

Source: LendingTree analysis of U.S. Census Bureau Household Pulse Survey data from Sept. 14 to 26, 2022.

“It doesn’t surprise me at all that folks in their 20s and 30s are struggling to cover their spending,” Schulz says. The youngest of the group are just getting started in their careers, may be struggling with private student loans and may be inexperienced with money and credit. “They may need to rely on friends and family for loans because they don’t have good enough credit to take advantage of better options,” Schulz says.

People in their 30s may earn a bit more income, but their financial challenges have likely increased. “They’re in one of the most expensive times of life,” Schulz says. “They are likely to have more experience with credit, and their higher income means they may have higher credit limits to lean on when times get tough.” Still, some might try to avoid taking on even more bank debt by instead looking toward friends or family first.

There are also racial disparities among card and loan borrowing and asking family friends or family for assistance. For example, Hispanic or Latino households are slightly more likely to rely on credit cards and loans than other groups — 41.0%, versus 36.5% overall.

Percentage of U.S. households (by race) using these methods to meet recent spending needs

RaceCredit cards or loansBorrowing from friends or family
Hispanic or Latino41.0%17.9%
White35.1%10.2%
Black36.9%24.9%
Asian38.0%8.3%
2 or more races or other races38.5%18.6%

Source: LendingTree analysis of U.S. Census Bureau Household Pulse Survey data from Sept. 14 to 26, 2022.

However, Black households have a much higher percentage of people borrowing from friends or family than others. This could be attributed to a racial gap in which Black borrowers may have less access to traditional credit. For example, a study by Urban Institute found that young adults in majority-Black communities have a median credit score of 582 (compared with 687 in majority-white communities).

States where households rely on credit cards or loans to meet spending needs the most

While credit cards and loans are helping to cover expenses across the U.S., it’s more prevalent in some states. Atop the list is New Jersey, where 43.9% of households are relying on credit to make ends meet. Right behind the Garden State are Florida (41.4%) and Pennsylvania (39.5%).

At the bottom are the District of Columbia (26.0%), Arkansas (28.3%) and New Mexico (28.5%).

Percentage of U.S. households (by state) using credit cards or loans to meet recent spending needs

RankStateCredit cards or loans
1New Jersey43.9%
2Florida41.4%
3Pennsylvania39.5%
4Arizona38.9%
4Massachusetts38.9%
6New Hampshire38.7%
7Virginia38.6%
8California38.5%
9Missouri38.1%
10Colorado38.0%
10Louisiana38.0%
12Texas37.9%
13Georgia37.4%
14Montana37.2%
15North Dakota37.0%
16Delaware36.8%
17Michigan36.7%
17Utah36.7%
19Connecticut36.6%
19Illinois36.6%
21Hawaii36.2%
21New York36.2%
23Alaska36.1%
24Rhode Island36.0%
25Maryland35.7%
25Wisconsin35.7%
27Ohio35.4%
28Nebraska35.0%
29South Dakota34.6%
30Kentucky34.4%
31Idaho34.1%
31Washington34.1%
33Nevada33.8%
33West Virginia33.8%
35Tennessee33.2%
36Kansas33.1%
37Oregon32.9%
38Oklahoma32.7%
39Minnesota32.5%
40North Carolina32.0%
41Alabama31.4%
42Iowa31.0%
42South Carolina31.0%
44Mississippi30.9%
45Vermont30.8%
46Wyoming30.5%
47Indiana29.7%
47Maine29.7%
49New Mexico28.5%
50Arkansas28.3%
51District of Columbia26.0%

Source: LendingTree analysis of U.S. Census Bureau Household Pulse Survey data from Sept. 14 to 26, 2022.

States where households rely on borrowing from friends or family to meet spending needs the most

Southern hospitality may also extend to helping friends or family with financial struggles, as the top six states where households borrow from loved ones are in the South. Louisiana (19.6%), Alabama (19.5%) and Mississippi (18.5%) represent the top three.

However, the least likely households to borrow from friends or family are in three regions: Maine in the Northeast (7.5%), the District of Columbia in the South (7.9%) and Hawaii in the West (8.9%)

Percentage of U.S. households (by state) borrowing from friends or family to meet recent spending needs

RankStateBorrowing from friends or family
1Louisiana19.6%
2Alabama19.5%
3Mississippi18.5%
4Texas16.9%
5Georgia16.1%
6Arkansas15.4%
6Oregon15.4%
8New Mexico15.3%
9Arizona15.2%
10Indiana14.7%
10Tennessee14.7%
12Kentucky14.5%
13Utah14.2%
14California13.9%
15Oklahoma13.7%
16New Jersey13.6%
17Delaware13.4%
17Florida13.4%
17Nevada13.4%
20Illinois13.3%
21Wyoming13.2%
22Montana12.8%
23Michigan12.7%
24South Carolina12.6%
25Idaho12.5%
26Washington12.3%
27North Carolina12.1%
28Ohio12.0%
29Missouri11.9%
29Virginia11.9%
31Colorado11.8%
32South Dakota11.5%
32West Virginia11.5%
34Maryland11.3%
35Iowa11.0%
35New York11.0%
35Pennsylvania11.0%
38Nebraska10.6%
39Alaska10.5%
40Connecticut10.4%
41Minnesota10.1%
42North Dakota10.0%
43Rhode Island9.9%
44New Hampshire9.8%
45Wisconsin9.7%
46Massachusetts9.2%
47Kansas9.1%
48Vermont9.0%
49Hawaii8.9%
50District of Columbia7.9%
51Maine7.5%

Source: LendingTree analysis of U.S. Census Bureau Household Pulse Survey data from Sept. 14 to 26, 2022.

Price increases causing stress across the board

No matter how households are affording extra expenses caused by inflation, one thing that most have in common is feeling the mental strain of it all. Nearly three-quarters of households (74.9%) report that rising prices have caused them to feel very or moderately stressed over the past two months.

That percentage is higher among Hispanic or Latino (82.0%) and Black households (77.7%). Meanwhile, Asian households are lower than the average, at 69.2%.

Overall, only 5.9% say they aren’t stressed at all by rising prices, illustrating that inflation is having a widespread impact on the vast majority of Americans.

Percentage of U.S. households stressed by recent price increases

Stress level% of households stressed by recent price increases
Very stressful and moderately stressful74.9%
Very stressful47.0%
Moderately stressful27.9%
A little stressful19.2%
Not at all stressful5.9%

Source: LendingTree analysis of U.S. Census Bureau Household Pulse Survey data from Sept. 14 to 26, 2022.

More than 8 in 10 households are very or moderately stressed in five states: Mississippi (83.9%), Wyoming (82.3%), Arkansas (81.8%), Louisiana (81.6%) and Kentucky (81.1%). Four of those states are in the South, which has a higher percentage of people living at or below the poverty level than other regions.

The District of Columbia has the fewest households feeling inflation-induced anxiety, with 1 in 2 (50.0%) saying they’re very or moderately stressed. That could be correlated with D.C. being at the bottom among households relying on credit cards or loans and borrowing from friends or family. Less debt equals less stress.

Minnesota (63.5%) and Massachusetts (65.9%) round out the bottom three.

Percentage of U.S. households (by state) stressed by recent price increases

RankStateVery stressfulModerately stressfulA little stressfulNot at all stressfulVery stressful and moderately stressful
1Mississippi56.6%27.3%12.4%3.7%83.9%
2Wyoming52.4%29.9%14.9%2.8%82.3%
3Arkansas54.6%27.2%12.8%5.3%81.8%
4Louisiana56.8%24.8%14.2%4.1%81.6%
5Kentucky53.0%28.1%14.0%4.9%81.1%
6Alabama52.4%27.5%15.2%4.9%79.9%
7Montana50.7%28.6%16.0%4.8%79.2%
8Tennessee50.5%28.5%15.8%5.2%79.0%
9Oklahoma50.2%28.7%16.6%4.5%78.9%
10Florida51.6%26.5%16.0%5.9%78.1%
11South Dakota44.9%33.1%18.2%3.7%78.0%
12Missouri49.2%28.5%16.4%5.9%77.7%
13West Virginia52.6%24.9%18.2%4.3%77.5%
13Texas53.0%24.6%17.0%5.4%77.5%
13Indiana47.9%29.7%18.5%3.9%77.5%
16Idaho46.0%31.4%18.2%4.4%77.4%
17Georgia51.8%25.1%18.2%4.9%76.9%
18California48.9%27.4%18.1%5.7%76.3%
19North Dakota40.6%35.5%18.5%5.4%76.1%
20Ohio47.9%28.1%18.4%5.6%76.0%
21Nevada49.9%25.8%18.9%5.4%75.7%
22Arizona48.6%27.0%18.7%5.7%75.6%
23Michigan45.4%30.1%18.5%6.0%75.4%
24Kansas48.0%27.4%19.1%5.5%75.3%
25New Mexico54.7%20.5%18.9%5.9%75.2%
25Hawaii47.3%27.9%18.4%6.4%75.2%
25Utah44.3%30.9%19.7%5.2%75.2%
28Pennsylvania44.3%30.8%19.6%5.3%75.1%
28Delaware50.6%24.4%18.0%6.9%75.1%
30South Carolina45.5%29.1%19.6%5.9%74.6%
31Alaska38.6%35.1%20.3%6.0%73.7%
32New York44.6%28.9%20.1%6.5%73.4%
33Nebraska43.4%29.9%21.4%5.3%73.3%
34North Carolina44.9%28.3%17.5%9.4%73.1%
34Virginia46.5%26.6%22.0%4.9%73.1%
36Wisconsin41.6%30.8%21.4%6.2%72.4%
37New Jersey39.7%32.6%22.4%5.2%72.3%
38Maine40.2%31.3%22.1%6.4%71.5%
39Illinois43.8%27.6%20.5%8.1%71.4%
40Iowa41.6%29.4%22.0%6.9%71.0%
41New Hampshire46.3%24.7%21.0%8.0%70.9%
42Washington40.3%29.9%22.9%6.8%70.3%
43Maryland40.0%30.0%24.2%5.8%70.0%
44Rhode Island44.4%25.3%24.3%6.0%69.7%
45Connecticut43.7%25.9%25.8%4.6%69.6%
46Colorado38.3%30.5%25.2%6.0%68.8%
47Vermont40.9%26.3%24.5%8.3%67.2%
48Oregon41.6%25.6%24.7%8.2%67.1%
49Massachusetts37.7%28.2%25.8%8.3%65.9%
50Minnesota32.9%30.6%28.2%8.2%63.5%
51District of Columbia30.6%19.4%34.1%15.9%50.0%

Source: LendingTree analysis of U.S. Census Bureau Household Pulse Survey data from Sept. 14 to 26, 2022. Totals were rounded to one decimal for display, so they may not equal 100%.

Methodology

LendingTree researchers analyzed U.S. Census Bureau Household Pulse Survey data to estimate the methods American households use to meet recent spending needs — mainly using credit cards or loans and borrowing from friends and family. Researchers also analyzed the rate of U.S. households that say price increases in the past two months have caused stress.

Researchers tracked these figures at the national and state levels. Respondents who didn’t respond weren’t included.

The Household Pulse Survey was fielded from Sept. 14 to 26, 2022 — the latest available when the research was compiled. Data from Sept. 15 to 27, 2021, was used for year-over-year comparisons.

 

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